If you’re getting closer to that point when you can stop setting your alarm clock on a weekday, you may be wondering whether you should be withdrawing from the stock market as well. After all, the traditional view of financial advisers is that those nearing retirement should reduce their equity exposure and move their capital into less volatile assets such as bonds.
Now, don’t get me wrong, this idea has persisted for good reason. With no salary to fall back on if your investments underperform (or completely fail), it’s vital to re-evaluate your attitude to risk as you prepare to quit the daily commute. Buying a group of speculative oil, mining or tech stocks isn’t recommended if you want to enjoy a degree of financial security in your golden years.
That said, none of us can afford to ignore the fact that better healthcare has also increased the possibility we might outlive our money. The solution? Move at least some cash into large, resilient, dividend-paying companies. Here are just two possible destinations for your cash.
As an investment, Aviva‘s (LSE: AV) biggest attraction is arguably the chunky dividends it pays out to shareholders. Covered twice by profits, shares in the £20bn cap insurer are expected to yield a cracking 5.2% in the current year based on an expected hike of 13% to the total dividend. In contrast to some of its FTSE 100 peers, these payouts also look secure when recent trading is taken into account.
Last month’s interim results revealed an 11% rise in operating profit over the reporting period to £1.47bn. An identical percentage increase was also seen in the value of general insurance net written premiums to almost £4.7bn.
Under the steerage of CEO Mark Wilson, Aviva continues to attract new customers. The value of new business climbed to just under £600m over H1 — a 27% increase on HY16. By the end of the reporting period, the company could boast total assets under management of £475bn.
Despite recent progress, Aviva’s stock still looks anything but overpriced. Trading at just nine times forecast earnings, the shares are not only less expensive relative to the market in general but also when compared to industry peers like Prudential.
Still a buy
Another option for the medium-to-long term would be cruise line operator Carnival (LSE: CCL). A beneficiary of low fuel costs and sterling’s weakness since the EU referendum vote, shares in the £37bn cap have been on an almost constant climb over the last year — rising 37%.
While recent performance means that buying a slice of the £37bn cap is now more expensive than it used to be, it’s worth noting that a forecast price-to-earnings growth (PEG) ratio of 1.2 for the current still implies that prospective investors would be getting a good deal.
While nowhere near as generous as Aviva when it comes to dividends, it should also be pointed out that Carnival’s 2.2% yield is fully covered by profits, suggesting that any kind of cut to the payouts looks very unlikely. Indeed, analysts are already expecting this to rise to 2.5% in the next financial year.
As part of a diversified portfolio of solid companies to set you up for a worry-free retirement, I still think Carnival has a lot going for it.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.